Jetstar Hong Kong Makes AOC Application

The aviation industry in Hong Kong is set for its next significant milestone after it was revealed last week that low-cost carrier Jetstar Airways has made an official application to the Hong Kong Civil Aviation Department for an Air Operators Certificate (AOC) for its proposed new venture Jetstar Hong Kong.

The budget operator revealed plans in March this year to establish the new carrier as part of its plan to expand its activities across Asia. The business strategy of the start-up calls for average fares up to 50 per cent cheaper than established operators with a range of destinations including points in mainland China, Japan, South Korea and South East Asia. The carrier is set to start operations in 2013, subject to regulatory approval.

The application commits the airline to meeting all necessary regulatory requirements, including the key proviso that its principle place of business and centre of its decision-making is in Hong Kong itself. A project team has been assembled and announcement of key positions – including a Hong Kong Chief Executive Officer, Chief Pilot and Head of Engineering – is expected shortly. Recruitment of the first wave of up to 100 pilots and cabin crew is expected to begin in coming months.

Jetstar Group Chief Executive Officer, Jayne Hrdlicka, said that lodging the AOC application was an important step to ultimately creating new travel demand for Hong Kong through lower fares. “From our experience in other markets like Japan, Singapore and Australia we know that introducing sustainably low fares means people travel more places, more often,” she said. “The reason low fares airlines are generally well-received in new markets is because of their ability to increase overall demand. In other words, rather than taking a share of the existing pie we make the pie bigger.”

Jetstar Hong Kong is anticipated to add billions of dollars a year in economic activity for the city, as well as several hundred skilled jobs, by the time it reaches 18 aircraft in 2015. This would be generated chiefly through tourist spending on hotels, shopping and leisure activities as well as spending on airline operations with local suppliers including ground handling and engineering.

According to Jetstar, recent research showed that 70 per cent of Hong Kong residents believed airfares to-and-from the city were too expensive and 66 per cent agreed low-cost carriers would benefit the local economy. “We’ve had strong support from tourism operators who want to see lower fares and competition bring more visitors to Hong Kong, particularly in the price-sensitive leisure end of the market,” added Hrdlicka.

The Hong Kong market is currently dominated by Cathay Pacific Airways which has a 35.1 per cent share of the total seat capacity this month. Dragonair is the second largest carrier with a 14.8 per cent share, followed by Hong Kong Airlines (5.1 per cent), China Airlines (4.6 per cent) and China Eastern Airlines (2.5 per cent). In the table below we highlighted the ten largest markets from Hong Kong in 2011 by O&D demand.